Deductibility of credit card fees to pay personal income tax debt

19 October 2010

If you’ve used your credit card to pay for your personal income tax debt, the ATO has confirmed that you generally cannot claim a deduction for the card payment fee.

For example, if you are an employee who receives a salary or wages, and you pay your income tax debt using a personal credit card and that incurs a card payment fee, the deduction isn’t available because there is insufficient connection between the card payment fee and the producing of assessable income. The fee was charged because you’ve borrowed money to pay a personal tax debt.

However, if you are a sole trader and operate a business credit card as part of your income generating activity, then your fees may be deductible. Deduction under s8-1in the context of being generally incurred in connection with losses and outgoings to the extent that they are used in producing assessable income.

As always, it’s best to talk to your accountant to determine what is and isn’t deductible. Call us on (02) 9957 4033 to discuss your situation.

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